Starbucks (SBUX) has ruled out buying Chipotle (CMG). A Starbucks spokesperson said on Monday, October 12, that “we are not buying Chipotle,” and that management is focused on its Back to Starbucks turnaround.
The statement ends speculation that began with a Financial Times report on October 8 that Starbucks had worked with advisers on a possible bid.
The Market Already Voted
Investors made their view clear before Starbucks did. Chipotle rose more than 7% after the FT report, while Starbucks fell about 3%. On Monday, the moves flipped: Starbucks rose about 1% in early trading and Chipotle fell about 4%.
Chipotle is worth around $40 billion. Paren Knadjian of EisnerAmper said a premium bid would likely have needed new debt and new shares, adding leverage and diluting Starbucks holders mid-turnaround.
Starbucks’ Numbers Back the Denial
Starbucks just got its balance sheet in better shape. Net debt to EBITDA fell to 2.04x in the quarter ended June 28, down from 2.90x the quarter before and the lowest level in two years.
The turnaround is reaching the margins, too. TIKR’s EBIT margin rose to 12.92% from 8.42% the prior quarter and 9.51% a year earlier. Part of that jump won’t repeat: Starbucks credited tariff refunds that largely offset tariffs paid over the first three quarters of the fiscal year, and the China joint venture lifted its international margin. It’s still short of the 13.52% Starbucks posted two years ago, so the recovery isn’t finished.
A deal that size would likely have required additional borrowing and new shares, putting pressure on Starbucks’ balance sheet just as margins started to recover.
For Chipotle, Starbucks’ denial removes a potential takeover catalyst. The stock has nearly halved since Brian Niccol left to run Starbucks in 2024, and its recovery now has to come from its own results.
October 29 Will Test Starbucks’ Turnaround
Ruling Chipotle out was the right call, and the balance sheet backs it. Starbucks reports fiscal fourth-quarter results and gives fiscal 2027 guidance after the close on Thursday, October 29. If EBIT margin holds above 12% once the tariff refunds drop out, the June quarter starts to look like a lasting turn, and the case for staying focused gets stronger.
Want to check Starbucks’ leverage and margin trend before October 29? Pull up the same charts on TIKR for free and see how the next quarter lands. Learn more here.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
